The Urethane Blog

GM Slashes Jobs

GM Slashes 2000 Jobs, Suspends 3rd Shift On Bloated Inventories, Slowing Sales

Who could have seen this coming? Just weeks after Ford idled four factories due to slumping sales and excess inventory, GM just followed by slashing 2000 jobs permanently and suspending a third shift at production facilities in early 2017.

We have warned numerous times that there is only one way this ends…


And so it just did…

GM Statement:

General Motors today announced initiatives to strengthen and align its production output at key U.S. manufacturing operations. The plans include investing more than $900 million in three facilities — Toledo Transmission Operations in Ohio, Lansing Grand River in Michigan and Bedford Casting Operations in Indiana —  to prepare the facilities for future product programs.


GM also announced plans to align production output with demand for cars built at the Lordstown, Ohio, and Lansing Grand River, Michigan, assembly plants. As the customer shift from cars to crossovers and trucks is projected to continue, GM will suspend the third shift of production at both facilities in the first quarter of 2017.

The Lordstown plant builds the compact Chevrolet Cruze, whose U.S. sales through October were down 20 percent. The Lansing Grand River plant builds the Cadillac ATS and CTS, whose sales were down 17 percent through October.

And Reuters confirms, General Motors Co plans to lay off 2,000 employees at two U.S. auto plants in early 2017, the automaker said on Wednesday.
As for the first time since 2009, auto inventories have declined YoY…

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As Gavekal Capital blog’s Eric Bush notes, there are a lot of disruptions taking place in the auto industry.

Uber, Lyft and many smaller regional competitors are driving taxi drivers crazy and have made it easier than ever to get around without owning a vehicle.


Companies like Car2Go, Zipcar, (and BMW?) give consumers the freedom to drive while not having to worry about having car insurance or a car payment.


Turo even makes it easy to rent out your car Airbnb-style which helps many owners make some money from their depreciating asset that usually goes unused 95% of the time.


And on top of this a driverless revolution is seemingly on its way.

This dire news (at least from the prospective of an auto company) leads us to our chart of the day which shows the amount of of money spent on motor vehicles as a percentage of disposable income and as a percentage of GDP.


The good news is that in both cases these series are above 2008 lows.

The bad news, however, is that the cyclical rebound looks like it may be over and spending on cars is topping out below prior cyclical lows in in 1970, 1974, 1980 and 2005.

Whenever the next recession hits, its not hard to imagine 2008 lows being taken out.